Supermarket operator Morrisons has reported a further drop in underlying sales in the first three months of its financial year.

For the three months to May 5, sales – excluding fuel - dipped 1.8 per cent year on year, which was in line with analysts' estimates and an improvement on the 4.1 per cent sales drop reported for the previous quarter.

Adding fuel sales, overall sales were up 0.6 per cent.

Morrisons had reported like-for-like Christmas sales for the six weeks to January 1 of just 0.7 per cent despite recording record footfall.

In the previous quarter to February, Morrisons went on to report a 4.1 per cent decline in like-for-like sales.

In March, Morrisions had also reported its first drop in profit in six years - down 7.2 per cent to £879 million - in full year results to February 3.

In a market update today, chief executive Dalton Philips admitted the grocer was decades behind its competitors with regards to its online presence and offering.

Morrisons remains the only supermarket in the UK's so-called big four operators not to have an online food business.

The grocer said plans to launch its own online food offering by January 2014 are "progressing" and it was continuing partnership discussions with online retailer Ocado.

Philips said: "Strategically, our ambition of building a genuinely multi-format, multi-channel Morrisons is right on track."

Morrisions opened six new stores in the last trading quarter and has also acquired more than 80 sites to add to its convenience store chain.

The firm said it was "on track" to meet its target of having 100 convenience stores by the end of the year, with 20 opening in the first half.